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What changed in MasterCraft Boat Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MasterCraft Boat Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+227 added−207 removedSource: 10-K (2024-08-30) vs 10-K (2023-08-30)

Top changes in MasterCraft Boat Holdings, Inc.'s 2024 10-K

227 paragraphs added · 207 removed · 169 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

104 edited+27 added−16 removed157 unchanged
Biggest changeOur credit facilities contain covenants which may limit our operating flexibility; failure to comply with covenants may result in our lenders restricting or terminating our ability to borrow under such credit facilities. In the past, we have relied on our existing credit facilities to provide us with adequate liquidity to operate our business.
Biggest changeIn the past, we have relied on our existing credit facilities to provide us with adequate liquidity to operate our business. The availability of borrowing amounts under our credit facilities is dependent on compliance with the debt covenants set forth in our credit agreement, which at times we may seek to proactively amend based on our future outlook.
Demand volatility may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine, or other travel restrictions; dealership closures due to illness or government restrictions; a reduction in boating activity as a result of governmental actions or self-quarantine measures; shifts in demand away from discretionary products; and reduced options for 13 marketing and promotion of products.
Demand volatility may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine, or other travel restrictions; dealership closures due to illness or government restrictions; a reduction in boating activity as a result of governmental actions or self-quarantine measures; shifts in demand away from discretionary products; and reduced options for marketing and promotion of products.
Our Aviara portfolio of luxury recreational day boats was designed in-house with the vision to create pleasure crafts that defy compromise. The Aviara brand drew on MasterCraft’s legacy of quality. Aviara’s boat designs were inspired by four product design principles – Progressive Style, Elevated Control, Modern Comfort and Quality Details.
The Aviara portfolio of luxury recreational day boats was designed in-house with the vision to create pleasure crafts that defy compromise. The Aviara brand drew on MasterCraft’s legacy of quality. Aviara’s boat designs were inspired by four product design principles – Progressive Style, Elevated Control, Modern Comfort and Quality Details.
In addition, if we become exposed to additional claims and litigation relating to the use of our products, our reputation may be adversely affected by such claims, whether or not successful, including by generating potential negative publicity about our products, which could adversely impact our business and financial condition. Our intellectual property rights may be inadequate to protect our business.
In addition, if we become exposed to additional claims and litigation relating to the use of our products, our reputation may be adversely affected by such claims, whether or not successful, including by generating potential negative publicity about our products, which could adversely impact our business and financial condition. 14 Our intellectual property rights may be inadequate to protect our business.
In addition to our product strategy, we manage a separate innovation development process which allows us to design innovative new features for our boats in a disciplined manner and to launch these innovations in a more rapid time frame and with higher quality. These enhanced processes have reduced the time to market for our new product pipeline.
In addition to our product strategy, we manage a separate innovation development process which allows us to design innovative new features for our boats in a disciplined manner and to launch these innovations in a more rapid time frame and with higher 4 quality. These enhanced processes have reduced the time to market for our new product pipeline.
Our reputation may be adversely affected by such claims, whether or not successful, including potential negative publicity about our products. In addition, if any of our products are, or are alleged to be, defective, we may be required to participate in a recall of that product if the defect or alleged defect relates to safety.
Our reputation may be adversely affected by such claims, whether or not successful, 16 including potential negative publicity about our products. In addition, if any of our products are, or are alleged to be, defective, we may be required to participate in a recall of that product if the defect or alleged defect relates to safety.
Our amended and restated certificate of incorporation authorizes us to issue shares of common stock and options, rights, warrants, and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise.
Our amended and restated certificate of incorporation authorizes us to issue shares of common stock and options, rights, warrants, and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our Board in its sole discretion, whether in connection with acquisitions or otherwise.
If we fail to meet these objectives, it could adversely affect our ability to meet customer demand for products and 8 increase the cost of production versus projections, both of which could result in a significant adverse impact on operating and financial results.
If we fail to meet these objectives, it could adversely affect our ability to meet customer demand for products and increase the cost of production versus projections, both of which could result in a significant adverse impact on operating and financial results.
Our business operations could be negatively impacted by an outage or breach of our information technology systems, network disruptions, or a cybersecurity event. 12 We manage our business operations through a variety of information technology systems and their underlying infrastructure, which we continually enhance to increase efficiency and security.
Our business operations could be negatively impacted by an outage or breach of our information technology systems, network disruptions, or a cybersecurity event. We manage our business operations through a variety of information technology systems and their underlying infrastructure, which we continually enhance to increase efficiency and security.
In evaluating the potential for impairment of goodwill and trade names, we make assumptions regarding future operating performance, business trends, and market and economic conditions. Such analyses further require us to make certain assumptions about sales, operating margins, growth rates, and discount rates.
In evaluating the potential 15 for impairment of goodwill and trade names, we make assumptions regarding future operating performance, business trends, and market and economic conditions. Such analyses further require us to make certain assumptions about sales, operating margins, growth rates, and discount rates.
Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions, and other factors that our board of directors may deem relevant.
Any decision to declare and pay dividends in the future will be made at the discretion of our Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions, and other factors that our Board may deem relevant.
Our strategy is to launch several new models each year, which will allow us to renew our product portfolio with innovative offerings at a rate that we believe will be difficult for our competitors to match without significant additional capital investments.
Our strategy is to launch new models each year, which will allow us to renew our product portfolio with innovative offerings at a rate that we believe will be difficult for our competitors to match without significant additional capital investments.
In addition, independent dealers in the 10 powerboat industry have experienced significant consolidation in recent years, which could result in the loss of one or more of our dealers in the future if the surviving entity in any such consolidation purchases similar products from a competitor.
In addition, independent dealers in the powerboat industry have experienced significant consolidation in recent years, which could result in the loss of one or more of our dealers in the future if the surviving entity in any such consolidation purchases similar products from a competitor.
If third parties claim that we infringe on their intellectual property rights, our financial condition could be adversely affected. 14 We face the risk of claims that we have infringed third parties’ intellectual property rights.
If third parties claim that we infringe on their intellectual property rights, our financial condition could be adversely affected. We face the risk of claims that we have infringed third parties’ intellectual property rights.
(“SSI”) data, the top five brands accounted for approximately 71% of the ski/wake markets and approximately 50% for the pontoon market. Market participants also range from small, single-product businesses to large, diversified companies. In addition, we compete indirectly with businesses that offer alternative leisure products and activities.
(“SSI”) data, the top five brands accounted for approximately 71% of the ski/wake markets and approximately 52% for the pontoon market. Market participants also range from small, single-product businesses to large, diversified companies. In addition, we compete indirectly with businesses that offer alternative leisure products and activities.
We have engaged our key suppliers in collaborative preferred supplier relationships and have developed processes including annual cost reduction targets, regular reliability projects, and extensive product testing requirements to ensure that our suppliers produce to the highest levels of quality expected of our brands and at lowest total cost.
We have engaged our key suppliers in collaborative preferred supplier relationships and have developed processes including annual cost reduction targets, product reliability improvement projects, and extensive product testing requirements to ensure that our suppliers produce to the highest levels of quality expected of our brands and at lowest total cost.
Future share repurchases will also diminish our cash reserves, which may impact our ability to pursue attractive strategic 16 opportunities.
Future share repurchases will also diminish our cash reserves, which may impact our ability to pursue attractive strategic opportunities.
The impact of actual or potential public health emergencies, epidemics, or pandemics on the Company, our suppliers, dealers, and consumers, and the general economy could be wide-ranging and significant, depending on the nature of the issue, governmental actions taken in response, and the public reaction.
The impact of actual or potential public health emergencies, epidemics, or pandemics on us, our suppliers, dealers, and consumers, and the general economy could be wide-ranging and significant, depending on the nature of the issue, governmental actions taken in response, and the public reaction.
We believe MasterCraft has the only boat manufacturing facility to achieve compliance with all three of the ISO 9001 (Quality Management Systems), 14001 (Environmental Management Systems), and 18001 (International Occupational Health and Safety Management System) standards. Crest boats are manufactured at our 270,000 square-foot facility located in Owosso, Michigan.
We believe MasterCraft has the only boat manufacturing facility to achieve compliance with all three of the ISO 9001 (Quality Management Systems), 14001 (Environmental Management Systems), and 45001 (International Occupational Health and Safety Management System) standards. Crest and Balise boats are manufactured at our 270,000 square-foot facility located in Owosso, Michigan.
We believe that the market recognizes MasterCraft as a premier brand in the powerboat industry due to the overall superior value proposition that our boats deliver to consumers. We work tirelessly every day to maintain this iconic brand reputation. Crest Segment Our Crest segment consists of our Crest brand, which manufactures pontoon boats.
We believe that the market recognizes MasterCraft as a premier brand in the powerboat industry due to the overall superior value proposition that our boats deliver to consumers. We work tirelessly every day to maintain this iconic brand reputation. Pontoon Segment Our Pontoon segment, which manufactures and sells pontoon boats, consists of our Crest brand and our Balise brand.
We currently hold more than 50 U.S. patents and more than 10 foreign patents, including utility and design patents for our transom surf seating, our DockStar handling system, and our SurfStar surf system technology among numerous other innovations. Provided that we comply with all statutory maintenance requirements, our patents are expected to expire between 2028 and 2041.
We currently hold more than 65 U.S. patents and more than 10 foreign patents, including utility and design patents for our transom surf seating, our DockStar handling system, and our SurfStar surf system technology among numerous other innovations. Provided that we comply with all statutory maintenance requirements, our patents are expected to expire between 2028 and 2042.
Our Segments MasterCraft Segment Our MasterCraft segment consists of our MasterCraft brand, which manufactures premium ski/wake boats. The MasterCraft brand was founded in 1968 and evolved over the next 55 years to become the most award-winning ski/wake boat manufacturer in the world.
MasterCraft Segment Our MasterCraft segment, which manufactures and sells premium ski/wake boats, consists of our MasterCraft brand. The MasterCraft brand was founded in 1968 and evolved over the next 55-plus years to become the most award-winning ski/wake boat manufacturer in the world.
Risks Relating to Ownership of our Common Stock Inefficient or ineffective allocation of capital could adversely affect our operating results and/or stockholder value. We strive to allocate capital in a manner that enhances stockholder value, lowers our cost of capital, or demonstrates our commitment to return excess capital to stockholders, while maintaining our ability to invest in strategic growth opportunities.
Risks Relating to Ownership of our Common Stock Inefficient or ineffective allocation of capital could adversely affect our operating results and/or shareholder value. We strive to allocate capital in a manner that enhances shareholder value, lowers our cost of capital, or demonstrates our commitment to return excess capital to shareholders, while maintaining our ability to invest in strategic growth opportunities.
We define international dealers as those dealers with locations outside of North America. We are present in Europe, Australia, South America, Africa, Asia, including Hong Kong, and the Middle East. We generated 4.6%, 5.5%, and 5.1% of our net sales outside of North America in fiscal 2023, 2022, and 2021, respectively.
We define international dealers as those dealers with locations outside of North America. We are present in Europe, Australia, South America, Africa, Asia, including Hong Kong, and the Middle East. We generated 5.9%, 4.6%, and 5.5% of our net sales outside of North America in fiscal 2024, 2023, and 2022, respectively.
Borrowings under our revolving credit facility and term loans are at variable rates of interest and expose us to interest rate risk. Reference rates used to determine the applicable interest rates for our debt began to rise significantly in the second half of fiscal 2022, and continued to rise throughout fiscal 2023.
Borrowings under our revolving credit facility and term loans are at variable rates of interest and expose us to interest rate risk. Reference rates used to determine the applicable interest rates for our debt began to rise significantly in the second half of fiscal 2022, continued 7 to rise throughout fiscal 2023, and remained elevated throughout fiscal 2024.
Therefore, if we do not properly allocate our capital or implement a successful cash management strategy, including with respect to returning value to our stockholders through this share repurchase authorization, we may fail to produce optimal financial results and experience a reduction in stockholder value.
Therefore, if we do not properly allocate our capital or implement a successful cash management strategy, including with respect to returning value to our shareholders through this share repurchase authorization, we may fail to produce optimal financial results and experience a reduction in shareholder value.
The ProStar, XStar and X models are geared towards the consumer seeking the most premium and highest performance boating experience that we offer, and generally command a price premium over our competitors’ boats at retail prices ranging from approximately $185,000 to $320,000.
The ProStar, XStar and X models are geared towards the consumer seeking the most premium and highest performance boating experience that we offer, and generally command a price premium over our competitors’ boats at retail prices ranging from approximately $120,000 to $300,000.
Our research and product development expense for fiscal 2023, 2022, and 2021 was $8.3 million, $7.2 million, and $5.8 million, respectively. 4 Intellectual Property We rely on a combination of patent, trademark, and copyright protection, trade secret laws, confidentiality procedures, and contractual provisions to protect our rights in our brands, products, and proprietary technology.
Our research and product development expense for fiscal 2024, 2023, and 2022 was $8.6 million, $8.3 million, and $7.2 million, respectively. Intellectual Property We rely on a combination of patent, trademark, and copyright protection, trade secret laws, confidentiality procedures, and contractual provisions to protect our rights in our brands, products, and proprietary technology.
We also own in excess of 130 trademark registrations in various countries around the world, most notably for the MasterCraft, Crest, and Aviara names and/or logos, as well as numerous model names in MasterCraft’s Star Series, X, XT, and NXT product families, and we have several pending applications for additional registrations.
We also own in excess of 130 trademark registrations in various countries around the world, most notably for the MasterCraft, Crest, and Aviara names and/or logos, as well as numerous model names in MasterCraft’s Star Series, X, XT, and NXT product families, and we have several pending applications for additional registrations, including for the recently launched Balise brand.
Significant competition exists for each of our brands, and the markets in which we compete range from being relatively concentrated for the ski/wake category, to being fragmented for the pontoon category. As of December 2022, based on Statistical Surveys, Inc.
Significant competition exists for each of our brands, and the markets in which we compete range from being relatively concentrated for the ski/wake category, to being fragmented for the pontoon category. As of March 2024, based on Statistical Surveys, Inc.
Additionally, we maintain quarterly discussions with our board of directors to address cyber risks and system and process enhancements.
Additionally, we maintain quarterly discussions with our Board to address cyber risks and system and process enhancements.
This ongoing dialogue can include certain divisive activist tactics, which can take many forms. Some shareholder activism, including potential proxy contests, could result in substantial costs, such as legal fees and expenses, and divert management’s and our board of director’s attention and resources from our businesses and strategic plans.
This ongoing dialogue can include certain divisive activist tactics, which can take many forms. Some shareholder activism, including potential proxy contests, could result in substantial costs, such as legal fees and expenses, and divert management’s 17 and our Board’s attention and resources from our businesses and strategic plans.
If interest rates continue to increase, the debt service obligations on our indebtedness will continue to increase even if the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our 7 indebtedness, will correspondingly decrease.
If interest rates continue to increase or remain elevated, the debt service obligations on our indebtedness will continue to increase or remain elevated even if the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.
If we are not able to maintain our ability to borrow under our credit facilities, or to raise additional capital when needed, our business and operations will be materially adversely affected. Actual or potential public health emergencies, epidemics, or pandemics, such as the COVID-19 pandemic, could have a material adverse effect on our business, results of operations, or financial condition.
If we are not able to maintain our ability to borrow under our credit facilities, or to raise additional capital when needed, our business and operations will be materially adversely affected. Actual or potential public health emergencies, epidemics, or pandemics could have a material adverse effect on our business, results of operations, or financial condition.
Inflation and rising interest rates could adversely affect our financial results. The market prices of certain materials and components used in manufacturing our products, especially resins that are made with hydrocarbon feedstocks, fiberglass, aluminum, lumber, and steel, can be volatile.
Inflation and elevated interest rates for prolonged periods could adversely affect our financial results. The market prices of certain materials and components used in manufacturing our products, especially resins that are made with hydrocarbon feedstocks, fiberglass, aluminum, lumber, and steel, can be volatile.
Today, MasterCraft participates in the fastest growing category within the powerboat industry by producing the industry’s premier competitive water ski, wakeboarding, and wake surfing performance boats. We believe the MasterCraft brand is known among boating enthusiasts for high performance, premier quality, and relentless innovation.
Today, MasterCraft participates in the highest margin producing category within the powerboat industry by manufacturing the industry’s premier competitive water ski, wakeboarding, and wake surfing performance boats. We believe the MasterCraft brand is known among boating enthusiasts for high performance, premier quality, and relentless innovation.
In July 2023, the board of directors of the Company authorized a new share repurchase program under which the Company may repurchase up to $50 million of its outstanding shares of common stock. The new authorization will become effective upon the expiration of the Company's existing $50 million share repurchase authorization.
In July 2023, the Board authorized a new share repurchase program under which the Company may repurchase up to $50 million of its outstanding shares of common stock. The new authorization became effective upon the expiration of the Company’s previously existing $50 million share repurchase authorization.
Crest participates in the second-fastest growing category in the powerboat industry. Crest, which we acquired in October 2018, was founded in 1957 and has grown to be one of the top producers of innovative, high-quality pontoon boats ranging from 20 to 27 feet.
The Pontoon segment participates in the largest unit producing category in the powerboat industry. Crest, which we acquired in October 2018, was founded in 1957 and has grown to be one of the top producers of innovative, high-quality pontoon boats ranging from 20 to 27 feet.
In connection with these agreements, we may have an obligation to repurchase our products from a finance company under certain circumstances. This obligation is triggered if a dealer defaults on its debt obligations to a finance company. In addition, applicable laws regulating dealer relations may also require us to repurchase our products from our dealers under certain circumstances.
This obligation is triggered if a dealer defaults on its debt obligations to a finance company. In addition, applicable laws regulating dealer relations may also require us to repurchase our products from our dealers under certain circumstances.
We depend on our network of independent dealers which creates additional risks. Substantially all of our sales are derived from our network of independent dealers. Maintaining a reliable network of dealers is essential to our success. Our agreements with dealers in our networks typically provide for one-year terms, although some agreements have longer terms.
Substantially all of our sales are derived from our network of independent dealers. Maintaining a reliable network of dealers is essential to our success. Our agreements with dealers in our networks typically provide for one-year terms, although some agreements have longer terms.
We perform an annual review of management succession plans with our board of directors, including reviewing executive officer and other important positions to substantially mitigate the risk associated with key contributor transitions, but we cannot ensure that all transitions will be implemented successfully.
We perform an annual review of management succession plans with our board of directors (the “Board”), including reviewing executive officer and other important positions to substantially mitigate the risk associated with key contributor transitions, such as our Chief Executive Officer leadership transition in fiscal 2024, but we cannot ensure that all transitions will be implemented successfully.
Catastrophic events, including natural and environmental disasters, acts of terrorism, or civil unrest, could have a negative effect on our operations and financial results. We rely on the continuous operation of our manufacturing facilities in Vonore, Tennessee, Merritt Island, Florida, and Owosso, Michigan for the production of our products.
Catastrophic events, including natural and environmental disasters, acts of terrorism, or civil unrest, could have a negative effect on our operations and financial results. We rely on the continuous operation of our manufacturing facilities for the production of our products.
These individuals bring to our product development efforts significant expertise across core disciplines, including boat design, computer-aided design, naval engineering, electrical engineering, and mechanical engineering.
Our product development and engineering group brings to our product development efforts significant expertise across core disciplines, including boat design, computer-aided design, naval engineering, electrical engineering, and mechanical engineering.
In recent history, the MasterCraft brand has consistently competed for the leading market share position in the U.S. among manufacturers of ski/wake boats based on unit volume. As of December 2022, based on SSI data, the MasterCraft brand has the #1 market share in the ski/wake category with 20.8%.
In recent history, the MasterCraft brand has consistently competed for the leading market share position in the U.S. among manufacturers of ski/wake boats based on unit volume. As of March 2024, based on SSI data, the MasterCraft brand has the #1 market share in the ski/wake category with 19.3%.
In addition, an uncorrected defect or supplier's variation in a raw material, part, or component, either unknown to us or incompatible with our manufacturing process, could jeopardize our ability to manufacture products. 9 Some additional supply chain disruptions that could impact our operations, impair our ability to deliver products to customers, and negatively affect our financial results include: • an outbreak of disease or facility closures due to public health threats; • a deterioration of our relationships with suppliers; • events such as natural disasters, power outages, or labor strikes; • financial or political instability in any of the countries in which our suppliers operate; • financial pressures on our suppliers due to a weakening economy or unfavorable conditions in other end markets; • supplier manufacturing constraints and investment requirements; or • termination or interruption of supply arrangements.
Some additional supply chain disruptions that could impact our operations, impair our ability to deliver products to customers, and negatively affect our financial results include: • an outbreak of disease or facility closures due to public health threats; 10 • a deterioration of our relationships with suppliers; • events such as natural disasters, power outages, or labor strikes; • financial or political instability in any of the countries in which our suppliers operate; • financial pressures on our suppliers due to a weakening economy or unfavorable conditions in other end markets; • supplier manufacturing constraints and investment requirements; or • termination or interruption of supply arrangements.
Competition affects our ability to succeed in both the markets we currently serve and new markets that we may enter in the future. Competition is based primarily on brand name, price, product selection, and product performance.
We also compete against consumer demand for used boats. Competition affects our ability to succeed in both the markets we currently serve and new markets that we may enter in the future. Competition is based primarily on brand name, price, product selection, and product performance.
The repair and replacement costs we could incur in connection with a recall could adversely affect our business. In addition, product recalls could harm our reputation and cause us to lose consumers, particularly if recalls cause consumers to question the safety or reliability of our products. An inability to identify and complete targeted acquisitions could negatively impact financial results.
The repair and replacement costs we could incur in connection with a recall could adversely affect our business. In addition, product recalls could harm our reputation and cause us to lose consumers, particularly if recalls cause consumers to question the safety or reliability of our products.
Also, while we have taken steps designed to balance production volumes for our boats with demand, our competitors could choose to reduce the price of their products, which could have the effect of reducing demand for our 11 new boats.
If this were to occur, it could have the effect of reducing demand among retail purchasers for our new boats. Also, while we have taken steps designed to balance production volumes for our boats with demand, our competitors could choose to reduce the price of their products, which could have the effect of reducing demand for our new boats.
The economic uncertainty caused by (i) general economic conditions, (ii) the impact of inflation and rising interest rates, (iii) labor shortages, (iv) supply chain disruptions, (v) regional or global conflicts, (vi) public health crises, pandemics, or national emergencies and (vii) actions and stimulus measures adopted by local, state and federal governments may lead to unfavorable business outcomes.
The economic uncertainty caused by (i) general economic conditions, (ii) the impact of inflation and elevated interest rates, (iii) labor shortages, (iv) supply chain disruptions, (v) political uncertainty, including the upcoming 2024 elections, and regional or global conflicts, including the conflict in the Gaza strip and other recent unrest in the Middle East, (vi) public health crises, pandemics, or national emergencies and (vii) actions and stimulus measures adopted by local, state and federal governments may lead to unfavorable business outcomes.
As a result, we must balance the economies of level production with seasonal retail sales patterns experienced by our dealers and other macroeconomic conditions. Failure to adjust manufacturing levels adequately may have a material adverse effect on our financial condition and results of operations. We have a fixed cost base that will affect our profitability if our sales decrease.
As a result, we must balance the economies of level production with seasonal retail sales patterns experienced by our dealers and other macroeconomic conditions. Failure to adjust manufacturing levels adequately, decreased demand or the need to reduce production may have a material adverse effect on our financial condition and results of operations.
Aviara boats are manufactured at our 130,000 square-foot facility in Merritt Island, Florida. The rigorous and consumer-centric attention to detail in the design and manufacturing of our products results in boats of high quality which provides an exceptional on water experience across all of our brands. Our dedication to quality permits our consumers to enjoy our products with confidence.
The rigorous and consumer-centric attention to detail in the design and manufacturing of our products results in boats of high quality which provides an exceptional on water experience across all of our brands. Our dedication to quality permits our consumers to enjoy our products with confidence.
In particular, reduced cash flow from decreases in sales and tightening credit markets could impair dealers' ability to fund operations. Inability to fund operations can force dealers to cease business, and we may be unable to obtain alternate distribution in the vacated market. An inability to obtain alternate distribution could unfavorably affect our net sales through reduced market presence.
Inability to fund operations can force dealers to cease business, and we may be unable to obtain alternate distribution in the vacated market. An inability to obtain alternate distribution could unfavorably affect our net sales through reduced market presence.
In addition, our cash flow and loss experience could be adversely affected if repurchased inventory is not successfully distributed to other dealers in a timely manner, or if the recovery rate on the resale of the product declines. The finance companies could require changes in repurchase terms that would result in an increase in our contractual obligations.
In addition, our cash flow and loss experience could be adversely affected if repurchased inventory is not successfully distributed to other dealers in a timely manner, or if the recovery rate on the resale of the product declines.
If such events occur over a prolonged period, they could increase our costs and difficulty of operating our business, including accurately planning and forecasting for our operations and inventory levels, which may adversely impact our results. The COVID-19 pandemic resulted in disruption, uncertainty, and volatility in the global financial and credit markets, and similar future events could to the same.
If such events occur over a prolonged period, they could increase our costs and difficulty of operating our business, including accurately planning and forecasting for our operations and inventory levels, which may adversely impact our results. Potential public health emergencies, epidemics, or pandemics could result in disruption, uncertainty, and volatility in the global financial and credit markets.
(“Ilmor”) is our exclusive engine supplier and for our Crest brand, Mercury Marine (“Mercury”) is our largest engine supplier. For our Aviara brand, Mercury provides outboard engines and Ilmor provides sterndrive engines. We maintain strong and long-standing relationships with Ilmor and Mercury. During fiscal 2023, Ilmor was our largest overall supplier.
(“Ilmor”) is our exclusive engine supplier and for our Crest brand, Mercury Marine (“Mercury”) is our largest engine supplier. For our Balise brand, we have partnered with Mercury to be the exclusive engine supplier. For the Aviara brand, Mercury provides outboard engines and Ilmor provides sterndrive engines. We maintain strong and long-standing relationships with Ilmor and Mercury.
While we have mitigation and service redundancy plans in place, outages and/or capacity constraints could still arise from a number of causes such as technical failures, natural disasters, fraud, or internal or third-party security attacks, which could negatively impact our ability to manufacture and/or operate our business.
While we have mitigation and service redundancy plans in place, outages and/or capacity constraints could still arise from a number of causes such as technical failures, natural disasters, fraud, or internal or third-party security attacks, which could negatively impact our ability to manufacture and/or operate our business. 13 Our credit facilities contain covenants which may limit our operating flexibility; failure to comply with covenants may result in our lenders restricting or terminating our ability to borrow under such credit facilities.
In addition to ski/wake and sterndrive engines, Ilmor’s affiliates produce engines used in a number of leading racing boats and race cars. We work closely with Ilmor to remain at the forefront of engine design, performance, and manufacturing. We believe our long-term relationships with our engine supplier partners is a key competitive advantage.
During fiscal 2024, Ilmor was our largest overall supplier. In addition to ski/wake and sterndrive engines, Ilmor’s affiliates produce engines used in a number of leading racing boats and race cars. We work closely with Ilmor to remain at the forefront of engine design, performance, and manufacturing.
Inflation, along with rising interest rates, could translate into an increased cost of boat ownership. Should inflation and increased interest rates continue to occur, prospective consumers may choose to forego or delay their purchases or buy a less expensive boat in the event credit is not available to finance their boat purchases.
Should inflation continue to occur and interest rates remain elevated, prospective consumers may choose to forego or delay their purchases or buy a less expensive boat in the event credit is not available to finance their boat purchases.
We believe that our brands are a significant contributor to the success of our business and that maintaining and enhancing our brands is important to expanding our consumer and dealer base. Failure to continue to protect our brands may adversely affect our business, financial condition, and results of operations.
We believe that our brands are a significant contributor to the success of our business and that maintaining and enhancing our brands is important to expanding our consumer and dealer base.
We may not be able to recruit or maintain sufficient skilled labor or our suppliers may not be able to deliver sufficient quantities of parts and components for us to match production with rapid changes in forecasted demand.
Conversely, to the extent dealer supply were to fall below retail demand, we would need to increase production. If production demand increases, we may not be able to recruit or maintain sufficient skilled labor or our suppliers may not be able to deliver sufficient quantities of parts and components for us to match production with rapid changes in forecasted demand.
Moreover, compliance with these regulatory requirements could increase the cost of our products, which in turn, may reduce consumer demand. 15 While we believe that we are in compliance with applicable federal, state, local, and foreign regulatory requirements, and hold all licenses and permits required thereunder, we cannot provide assurance that we will, at all times, be able to continue to comply with applicable regulatory requirements.
While we believe that we are in compliance with applicable federal, state, local, and foreign regulatory requirements, and hold all licenses and permits required thereunder, we cannot provide assurance that we will, at all times, be able to continue to comply with applicable regulatory requirements.
We could be uniquely affected by weather-related catastrophic events, as we have dealers and third-party suppliers located in regions of the United States that have been and may be exposed to damaging storms, such as hurricanes and tornados, floods and environmental disasters.
Additionally, if such an event occurs near our business locations, manufacturing facilities or key supplier facilities, business operations, and/or operating systems could be interrupted. 9 We could be uniquely affected by weather-related catastrophic events, as we have dealers and third-party suppliers located in regions of the United States that have been and may be exposed to damaging storms, such as hurricanes and tornados, floods and environmental disasters.
Acquisitions we may complete in the future, present these and other integration risks, including: • the possibility that the expected synergies and value creation will not be realized or will not be realized within the expected time period; • the risk that unexpected costs and liabilities will be incurred; • diversion of management attention; and • difficulties retaining employees.
Acquisitions we may complete in the future, present these and other integration risks, including: • the possibility that the expected synergies and value creation will not be realized or will not be realized within the expected time period; • the risk that unexpected costs and liabilities will be incurred; • diversion of management attention; and • difficulties retaining employees. 12 If we fail to timely and successfully integrate new businesses into existing operations, we may see higher costs, lost sales, or otherwise diminished earnings and financial results.
While, historically, inflation has not had a material effect on our results of operations, significant increases in inflation, particularly those related to wages and increases in the cost of raw materials, recently have, and may continue to have, an adverse impact on our business, financial condition, and results of operations. In addition, new boat buyers often finance their purchases.
Significant increases in inflation, particularly those related to wages and increases in the cost of raw materials, have, and may continue to have, an adverse impact on our business, financial condition, and results of operations. In addition, new boat buyers often finance their purchases. Inflation, along with elevated interest rates, could translate into an increased cost of boat ownership.
We are also deeply invested in attracting and developing the next generation of workforce talent to the boating industry. We’ve partnered with local community and technical colleges by developing training programs and donating boats and supplies to position graduates for jobs in the boating industry upon graduation. Employee safety is always a top priority.
We’ve partnered with local community and technical colleges by developing training programs and donating boats and supplies to position graduates for jobs in the boating industry upon graduation. Employee safety is always a top priority. We are focused on improving and innovating when it comes to the well-being of our dedicated workforce across our portfolio of brands.
Our Aviara brand is sold through a distribution network consisting of one dealer with 57 locations. Outside of North America. As of June 30, 2023, through our MasterCraft brand, we had a total of 43 international dealers and 43 locations. Our Crest brand had two international dealers in two locations. Aviara had no international dealers.
The Aviara brand was sold through a distribution network consisting of five dealers with 71 locations. Outside of North America. As of June 30, 2024, through our MasterCraft brand, we had a total of 40 international dealers and 40 locations. Our Pontoon segment had one international dealer in one location. Aviara had one international dealer in one location.
If economic conditions deteriorate, we anticipate that dealer failures or voluntary market exits would increase, especially if overall retail demand materially declines. Our dealers require adequate liquidity to finance their operations, including purchasing our products.
If economic conditions deteriorate, we anticipate that dealer failures or voluntary market exits would increase, especially if overall retail demand materially declines.
Fiscal concerns and policy changes may negatively impact worldwide economic and credit conditions and adversely affect our industry, business, and financial condition. Fiscal policy could have a material adverse impact on worldwide economic conditions, the financial markets, and availability of credit and, consequently, may negatively affect our industry, business, and overall financial condition.
Fiscal policy could have a material adverse impact on worldwide economic conditions, the financial markets, and availability of credit and, consequently, may negatively affect our industry, business, and overall financial condition. Consumers often finance purchases of our products, and as interest rates rise, the cost of financing the purchase also increases.
Furthermore, we must continue to meet or exceed consumers' expectations regarding product quality and after-sales service or our operating results could suffer. Our financial results may be adversely affected by our third-party suppliers' increased costs or inability to adjust for our required production levels due to changes in demand or global supply chain disruptions.
Our financial results may be adversely affected by our third-party suppliers’ increased costs or inability to adjust for our required production levels due to changes in demand or global supply chain disruptions.
As of December 2022, based on SSI data, the Crest brand has the #9 market share in the aluminum pontoon category with 4.1%. As of December 2022, based on SSI data, the Aviara brand has the #7 market share in the 30-foot to 43-foot bowrider category with 6.3%.
As of March 2024, based on SSI data, the Crest brand has the #11 market share in the aluminum pontoon category with 3.3%. As of March 2024, based on SSI data, the Aviara brand has the #10 market share in the 25-foot to 43-foot premium day boat category with 1.6%.
Consumers often finance purchases of our products, and as interest rates rise, the cost of financing the purchase also increases. While credit availability is adequate to support demand, interest rates began to rise significantly in the second half of fiscal 2022, and continued to rise throughout fiscal 2023.
While credit availability is adequate to support demand, interest rates began to rise significantly in the second half of fiscal 2022, continued to rise throughout fiscal 2023, and remained elevated throughout fiscal 2024.
A significant deterioration in the number or effectiveness of our dealers could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Although at present we believe dealer health to be generally favorable, weakening demand for marine products could hurt our dealers’ financial performance.
A significant deterioration in the number or effectiveness of our dealers could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Weakening demand for marine products could hurt our dealers’ financial performance. In particular, reduced cash flow from decreases in sales and tightening credit markets could impair dealers’ ability to fund operations.
The Premium Line boasts three Caribbean models with sleek lines, available tower options, unique color combinations and top-quality construction. The Ultimate Luxury Line represents the pinnacle of lavish amenities, featuring the Continental, Continental NX, and Savannah models. This lineup anticipates every need with thoughtful options, an industry-first integrated dual windshield and premium upholstery and audio upgrades.
The Ultimate Luxury Line represents the pinnacle of lavish amenities, featuring the Continental, Continental NX, and Savannah models. This lineup anticipates every need with thoughtful options, an industry-first integrated dual windshield and premium upholstery and audio upgrades. The Electric Line harmonizes industry innovations by introducing eco-friendly pontoon boats.
For fiscal 2023, the Company’s top ten dealers accounted for approximately 40% of our net sales and one of our dealers individually accounted for 14.9%, or approximately $98.6 million. North America. As of June 30, 2023, our MasterCraft brand had a total of 108 dealers across 158 locations. Our Crest brand had a total of 148 dealers across 185 locations.
For fiscal 2024, the Company’s top ten dealers accounted for approximately 40% of our net sales and one of our dealers individually accounted for 15.1%, or approximately $55.5 million. North America. As of June 30, 2024, our MasterCraft brand had a total of 100 dealers across 155 locations. Our Pontoon segment had a total of 141 dealers across 173 locations.
Any inability to achieve these objectives could adversely impact the profitability of our products and our ability to deliver desirable products to our consumers. In addition, we have made strategic capital investments in capacity expansion activities to successfully capture growth opportunities and enhance product offerings, including brand relocation and plant expansions.
In addition, we have made strategic capital investments in capacity expansion activities to successfully capture growth opportunities and enhance product offerings, including brand relocation and plant expansions.
Historically, the cost of achieving and maintaining compliance with applicable laws and regulations has not been material.
We believe that our operations and products are in compliance with these regulatory requirements. Historically, the cost of achieving and maintaining compliance with applicable laws and regulations has not been material.
We structure executive compensation to pay for performance, reward our executives with equity in the Company in order to align their interests with the interests of our stockholders and allow those employees to share in our stockholders’ success, which we believe creates a performance culture, maintains morale and attracts, motivates and retains top talent.
We structure executive compensation to pay for performance, reward our executives with equity in the Company in order to align their interests with the interests of our shareholders and allow those employees to share in our shareholders’ success, which we believe creates a performance culture, maintains morale and attracts, motivates and retains top talent. 5 Environmental, Safety, and Regulatory Matters Our operations are subject to extensive and frequently changing federal, state, local, and foreign laws and regulations, including those concerning product safety, environmental protection, and occupational health and safety.
The MasterCraft XT lineup is designed to offer ultimate flexibility to consumers with maximum customization and maximum performance at retail prices ranging from approximately $130,000 to $190,000. The NXT models offer the quality, performance, styling, and innovation of the MasterCraft brand to the entry-level consumer, with retail prices ranging from approximately $100,000 to $150,000.
The MasterCraft XT lineup is designed to offer ultimate flexibility to consumers with maximum customization and maximum performance at retail prices ranging from approximately $155,000 to $225,000.
Our strategic acquisitions pose risks, such as our ability to project and evaluate market demand; maximize potential synergies and cost savings; make accurate accounting estimates; and achieve anticipated business objectives.
Our failure to successfully do so could have a material adverse effect on our financial condition and results of operations. Additionally, strategic acquisitions once complete pose integration risks, such as our ability to project and evaluate market demand; maximize potential synergies and cost savings; make accurate accounting estimates; and achieve anticipated business objectives.
Failure to meet these standards could result in an inability to sell our boats in key markets, which would adversely affect our business.
Failure to meet these standards could result in an inability to sell our boats in key markets, which would adversely affect our business. Moreover, compliance with these regulatory requirements could increase the cost of our products, which in turn, may reduce consumer demand.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAll our Crest boats are manufactured in our 270,000 square-foot manufacturing facility located on approximately 63 acres in Owosso, Michigan. All our Aviara boats are manufactured in our 130,000 square-foot manufacturing facility on approximately 38 acres in Merritt Island, Florida.
Biggest changeAll our Crest and Balise boats are manufactured in our 270,000 square-foot manufacturing facility located on approximately 63 acres in Owosso, Michigan. All Aviara boats are manufactured in our 160,000 square-foot manufacturing facility on approximately 38 acres in Merritt Island, Florida.
ITEM 2. PRO PERTIES. As of June 30, 2023, all our MasterCraft boats and trailers are manufactured and lake-tested at our 310,000 square-foot manufacturing facility located on approximately 60 acres of lakefront land in Vonore, Tennessee. We also lease a 3,000 square-foot warehouse facility in West Yorkshire, England for warehousing of parts.
ITEM 2. PRO PERTIES. As of June 30, 2024, all our MasterCraft boats and trailers are manufactured and lake-tested at our 310,000 square-foot manufacturing facility located on approximately 60 acres of lakefront land in Vonore, Tennessee. We also lease a 3,000 square-foot warehouse facility in West Yorkshire, England for warehousing of parts.
Added
As previously noted, we plan to close the Aviara production facility and offer the property for open market sale following closing of the Aviara Transaction.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS. For a discussion of the Company’s legal proceedings, see Part IV – Item 15. – Note 12 Commitments and Contingencies to the Company’s Consolidated Financial Statements. ITEM 4. MINE SAFE TY DISCLOSURES. Not applicable. 18 PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS. For a discussion of the Company’s legal proceedings, see Part IV – Item 15. – Note 12 Commitments and Contingencies to the Company’s Consolidated Financial Statements. ITEM 4. MINE SAFE TY DISCLOSURES. Not applicable. 20 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the fiscal years ended June 30, 2023 and 2022, we repurchased approximately $22.9 million and $25.5 million of our common stock, respectively. As of June 30, 2023, the remaining authorization under the program was approximately $1.6 million.
Biggest changeThe new authorization became effective upon the completion of the Company’s prior $50.0 million stock repurchase authorization. As of June 30, 2024, $35.4 million remained available under the new authorization. During the fiscal years ended June 30, 2024 and 2023, we repurchased approximately $16.3 million and $22.9 million of our common stock, respectively.
Any future determination as to the declaration and payment of dividends, will be at the discretion of our board of directors and will depend on then-existing conditions, including our operating results, financial condition, contractual restrictions, capital requirements, business prospects, and other factors our board of directors may deem relevant.
Any future determination as to the declaration and payment of dividends, will be at the discretion of our Board and will depend on then-existing conditions, including our operating results, financial condition, contractual restrictions, capital requirements, business prospects, and other factors our Board may deem relevant.
See Item 1A “Risk Factors — Risks Relating to Ownership of Our Common Stock.” Issuer Purchases of Equity Securities On June 24, 2021, the board of directors of the Company authorized a stock repurchase program that allows for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024.
See Item 1A “Risk Factors — Risks Relating to Ownership of Our Common Stock.” Issuer Purchases of Equity Securities On June 24, 2021, the Board authorized a share repurchase program that allowed for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024.
The following stock performance graph illustrates the cumulative total shareholder return on our common stock for the period from June 30, 2018 to June 30, 2023, as compared to the Russell 2000 Index and the Dow Jones US Recreational Products Index.
The following stock performance graph illustrates the cumulative total shareholder return on our common stock for the period from June 30, 2019 to June 30, 2024, as compared to the Russell 2000 Index and the Dow Jones US Recreational Products Index.
Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act of 1934, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any filing of ours under the Securities Act or the Exchange Act.
(b) Average price per share excludes any excise tax imposed on certain stock repurchases as part of the Inflation Reduction Act of 2022. 21 Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act of 1934, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any filing of ours under the Securities Act or the Exchange Act.
The comparison assumes (i) a hypothetical investment of $100 in our common stock and the two above mentioned indices on June 30, 2018 and (ii) the full reinvestment of all dividends.
The comparison assumes (i) a hypothetical investment of $100 in our common stock and the two above mentioned indices on June 30, 2019 and (ii) the full reinvestment of all dividends. The comparisons in the graph are not intended to be indicative of possible future performance of our common stock.
The comparisons in the graph are not intended to be indicative of possible future performance of our common stock. 19 Securities Authorized for Issuance Under Equity Compensation Plans For information regarding securities authorized for issuance under our equity compensation plans, see Note 11 – Share-Based Compensation in Item 8 and Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Securities Authorized for Issuance Under Equity Compensation Plans For information regarding securities authorized for issuance under our equity compensation plans, see Note 11 – Share-Based Compensation in Item 8 and Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. ITEM 6. Reserved 22
During the three months ended June 30, 2023, the Company repurchased the following shares of common stock: Period Total Number of Shares Purchased Average Price Paid Per Share (a)(b) Total Number of Shares Purchased as part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan (dollars in thousands) April 3, 2023 - April 30, 2023 59,396 $ 29.29 59,396 $ 6,867 May 1, 2023 - May 28, 2023 112,490 28.24 112,490 3,690 May 29, 2023 - June 30, 2023 74,375 27.63 74,375 1,634 Total 246,261 $ — 246,261 - (a) Represents weighted average price paid per share excluding commissions paid.
During the three months ended June 30, 2024, the Company repurchased the following shares of common stock: Period Total Number of Shares Purchased Average Price Paid Per Share (a)(b) Total Number of Shares Purchased as part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan (dollars in thousands) April 1, 2024 - April 28, 2024 22,400 $ 20.79 22,400 $ 39,452 April 29, 2024 - May 26, 2024 113,448 20.34 113,448 37,145 May 27, 2024 - June 30, 2024 85,550 20.46 85,550 35,394 Total 221,398 221,398 (a) Represents weighted average price paid per share excluding commissions paid.
As of August 25, 2023, we had approximately 12,600 holders of record of our common stock. Dividends We presently do not anticipate declaring or paying cash dividends on our common stock.
As of August 23, 2024, we had approximately 20 registered holders per our transfer agent and 9,100 beneficial holders of record of our common stock. Dividends We presently do not anticipate declaring or paying cash dividends on our common stock.
(b) Average price per share excludes any excise tax imposed on certain stock repurchases as part of the Inflation Reduction Act of 2022. On July 24, 2023, the board of directors of the Company authorized a new share repurchase program under which the Company may repurchase up to $50 million of its outstanding shares of common stock.
As of June 30, 2023, $1.6 million remained available under this program, all of which was fully utilized during the fiscal 2024 first quarter ended October 1, 2023. On July 24, 2023, the Board authorized a new share repurchase program under which the Company may repurchase up to $50.0 million of its outstanding shares of common stock.
Removed
The new authorization will become effective upon the expiration of the Company's existing $50 million share repurchase authorization. As of June 30, 2023, there was $1.6 million of availability remaining under the existing stock repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeGAAP to Adjusted Net Income for the periods indicated: 2023 2022 2021 (Dollars in thousands, except per share) Net income from continuing operations $ 90,452 $ 87,945 $ 58,438 Income tax expense 27,135 26,779 16,080 Amortization of acquisition intangibles 1,849 1,849 1,849 Share-based compensation 3,656 3,510 2,932 Business development consulting costs (a) 312 — — Goodwill impairment (b) — 1,100 — Aviara transition costs (c) — — 2,150 Debt refinancing charges (d) — — 769 Adjusted Net Income before income taxes 123,404 121,183 82,218 Adjusted income tax expense (e) 28,383 27,872 18,910 Adjusted Net Income $ 95,021 $ 93,311 $ 63,308 Adjusted Net Income per share: Basic $ 5.39 $ 5.06 $ 3.37 Diluted $ 5.35 $ 5.01 $ 3.34 Weighted average shares used for the computation of (e) : Basic Adjusted Net Income per share 17,618,797 18,455,226 18,805,464 Diluted Adjusted Net Income per share 17,765,117 18,636,512 18,951,521 The following table presents the reconciliation of net income from continuing operations per diluted share to Adjusted net income per diluted share for the periods presented: 2023 2022 2021 Net income from continuing operations per diluted share $ 5.09 $ 4.72 $ 3.08 Impact of adjustments: Income tax expense 1.53 1.44 0.85 Amortization of acquisition intangibles 0.10 0.10 0.10 Share-based compensation 0.21 0.19 0.15 Business development consulting costs (a) 0.02 — — Goodwill impairment (b) — 0.06 — Aviara transition costs (c) — — 0.11 Debt refinancing charges (d) — — 0.04 Adjusted Net Income per diluted share before income taxes 6.95 6.51 4.33 Impact of adjusted income tax expense on net income per diluted share before income taxes (e) (1.60 ) (1.50 ) (0.99 ) Adjusted Net Income per diluted share 5.35 $ 5.01 $ 3.34 (a) Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of internal growth and other strategic initiatives.
Biggest changeGAAP to Adjusted Net Income for the periods indicated: (Dollar amounts in thousands, except per share data) 2024 2023 2022 Net income from continuing operations $ 8,722 $ 90,452 $ 87,945 Income tax expense 1,407 27,135 26,779 Impairments (a) 9,827 — 1,100 Amortization of acquisition intangibles 1,812 1,849 1,849 Share-based compensation (b) 2,598 3,656 3,510 CEO transition costs (c) 1,708 — — Business development consulting costs (d) — 312 — Adjusted Net Income before income taxes 26,074 123,404 121,183 Adjusted income tax expense (e) 5,214 28,383 27,872 Adjusted Net Income $ 20,860 $ 95,021 $ 93,311 Adjusted Net Income per share: Basic $ 1.23 $ 5.39 $ 5.06 Diluted $ 1.22 $ 5.35 $ 5.01 Weighted average shares used for the computation of (f) : Basic Adjusted Net Income per share 16,930,348 17,618,797 18,455,226 Diluted Adjusted Net Income per share 17,038,305 17,765,117 18,636,512 27 The following table presents the reconciliation of net income from continuing operations per diluted share to Adjusted net income per diluted share for the periods presented: 2024 2023 2022 Net income from continuing operations per diluted share $ 0.51 $ 5.09 $ 4.72 Impact of adjustments: Income tax expense 0.08 1.53 1.44 Impairments (a) 0.57 — 0.06 Amortization of acquisition intangibles 0.11 0.10 0.10 Share-based compensation (b) 0.15 0.21 0.19 CEO transition costs (c) 0.10 — — Business development consulting costs (d) — 0.02 — Adjusted Net Income per diluted share before income taxes 1.52 6.95 6.51 Impact of adjusted income tax expense on net income per diluted share before income taxes (e) (0.30 ) (1.60 ) (1.50 ) Adjusted Net Income per diluted share $ 1.22 $ 5.35 $ 5.01 (a) Represents non-cash charges recorded in the Aviara segment of $9.8 million primarily for impairment of property, plant, equipment and inventory in fiscal 2024 and $1.1 million for impairment of goodwill in fiscal 2022.
We believe Adjusted Net Income and Adjusted Net Income per share assists our board of directors, management, investors, and other users of the financial statements in comparing our net income on a consistent basis from period to period because it removes certain non-cash items and other items that we do not consider to be indicative of our core and/or ongoing operations and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate.
We believe Adjusted Net Income and Adjusted Net Income per share assists our Board, management, investors, and other users of the financial statements in comparing our net income on a consistent basis from period to period because it removes certain non-cash items and other items that we do not consider to be indicative of our core and/or ongoing operations and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate.
We estimate the costs that may be incurred under our basic limited warranty and record as a liability the amount 29 of such costs at the time the product revenue is recognized. The key judgements that affect our estimate for warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim.
We estimate the costs that may be incurred under our basic limited warranty and record as a liability the amount of such costs at the time the product revenue is recognized. The key judgements that affect our estimate for warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim.
Some of these limitations are: 24 • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and the Non-GAAP Measures do not reflect any cash requirements for such replacements; • The Non-GAAP Measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; • The Non-GAAP Measures do not reflect changes in, or cash requirements for, our working capital needs; • The Non-GAAP Measures do not reflect our tax expense or any cash requirements to pay income taxes; • The Non-GAAP Measures do not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; and • The Non-GAAP Measures do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our core and/or ongoing operations, but may nonetheless have a material impact on our results of operations.
Some of these limitations are: 26 • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and the Non-GAAP Measures do not reflect any cash requirements for such replacements; • The Non-GAAP Measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; • The Non-GAAP Measures do not reflect changes in, or cash requirements for, our working capital needs; • Certain Non-GAAP Measures do not reflect our tax expense or any cash requirements to pay income taxes; • Certain Non-GAAP Measures do not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; and • The Non-GAAP Measures do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our core and/or ongoing operations, but may nonetheless have a material impact on our results of operations.
See Note 12 in the accompanying Notes to Consolidated Financial Statements for more information. Repurchase Obligations — The Company has reserves to cover potential losses associated with repurchase obligations based on historical experience and current facts and circumstances. We incurred no material impact from repurchase events during fiscal 2023, 2022, or 2021.
See Note 12 in the accompanying Notes to Consolidated Financial Statements for more information. Repurchase Obligations — The Company has reserves to cover potential losses associated with repurchase obligations based on historical experience and current facts and circumstances. We incurred no material impact from repurchase events during fiscal 2024, 2023, or 2022.
Results of Operations We derived the consolidated statements of operations for the fiscal years ended June 30, 2023 and 2022 from our audited consolidated financial statements and related notes included elsewhere in this Form 10-K. Our historical results are not necessarily indicative of the results that may be expected in the future.
Results of Operations We derived the consolidated statements of operations for the fiscal years ended June 30, 2024 and 2023 from our audited consolidated financial statements and related notes included elsewhere in this Form 10-K. Our historical results are not necessarily indicative of the results that may be expected in the future.
If the carrying amount exceeds the fair value then the goodwill is considered impaired and an impairment loss is recognized in an amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the carrying amount of the goodwill allocated to that reporting unit. 28 The Company calculates the fair value of its reporting units considering both the income approach and market approach.
If the carrying amount exceeds the fair value then the goodwill is considered impaired and an impairment loss is recognized in an amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the carrying amount of the goodwill allocated to that reporting unit. 30 The Company calculates the fair value of its reporting units considering both the income approach and market approach.
In performing this qualitative analysis, the Company considers various factors, including the effect of market or industry changes and the reporting units' actual results compared to projected results. If the fair value of a reporting unit does not meet the "more likely than not" criteria discussed above, the impairment test for goodwill is a quantitative test.
In performing this qualitative analysis, the Company considers various factors, including the effect of market or industry changes and the reporting units’ actual results compared to projected results. If the fair value of a reporting unit does not meet the “more likely than not” criteria discussed above, the impairment test for goodwill is a quantitative test.
Inputs used to estimate this fair value include significant unobservable inputs that reflect the Company’s assumptions about the inputs that market participants would use and, therefore, this liability is classified within Level 3 of the fair value hierarchy. We incurred no material impact from repurchase events during fiscal 2023, 2022, or 2021.
Inputs used to estimate this fair value include significant unobservable inputs that reflect the Company’s assumptions about the inputs that market 32 participants would use and, therefore, this liability is classified within Level 3 of the fair value hierarchy. We incurred no material impact from repurchase events during fiscal 2024, 2023, or 2022.
Our actual results may differ materially from those contained in or implied by any forward-looking statements. This section generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Our actual results may differ materially from those contained in or implied by any forward-looking statements. This section generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Contractual Obligations As of June 30, 2023, the Company’s material cash obligations were as follows: Long-Term Debt Obligations — See Note 9 – Long-Term Debt in the accompanying Notes to Consolidated Financial Statements for further information.
Contractual Obligations As of June 30, 2024, the Company’s material cash obligations were as follows: Long-Term Debt Obligations — See Note 9 – Long-Term Debt in the accompanying Notes to Consolidated Financial Statements for further information.
Intangible assets not subject to amortization are assessed for impairment at least annually and whenever events or changes in circumstances indicate that it is more likely than not that an asset may be impaired.
Intangible assets not subject to amortization, including trade names, are assessed for impairment at least annually and whenever events or changes in circumstances indicate that it is more likely than not that an asset may be impaired.
We define Adjusted EBITDA as EBITDA further adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations. For the periods presented herein, these adjustments include share-based compensation, business development consulting costs, goodwill impairment, Aviara transition costs, and debt refinancing charges, as described in more detail below.
We define Adjusted EBITDA as EBITDA further adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations. For the periods presented herein, these adjustments include non-cash impairment charges, share-based compensation, CEO transition costs, and business development consulting costs, as described in more detail below.
The Company also utilizes various programs whereby it offers cash discounts or agrees to reimburse its dealers for certain floor plan interest costs incurred by dealers for limited periods of time, generally ranging up to nine months. Other Revenue Recognition Matters Dealers generally have no right to return unsold boats.
The Company also utilizes various programs whereby it offers cash discounts or agrees to reimburse its dealers for certain floor plan interest costs incurred by dealers for limited periods of time, generally ranging from six to 12 months. Other Revenue Recognition Matters Dealers generally have no right to return unsold boats.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Annual Report on Form 10-K and can be found in Item 7 of the Company’s Annual Report on Form 10-K for the year ended June 30, 2022 , which was filed with the SEC on September 9, 2022.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 are not included in this Annual Report on Form 10-K and can be found in Item 7 of the Company’s Annual Report on Form 10-K for the year ended June 30, 2023 , which was filed with the SEC on August 30, 2023.
In addition to the above, we have unrecognized tax benefits that are not reflected here because the Company cannot predict when open income tax years will close with completed examinations. See Note 10 in Notes to Consolidated Financial Statements for more information.
In addition to the above, we have unrecognized tax benefits that are not reflected here because the Company cannot predict when open income tax years will close with completed examinations. See Note 10 in Notes to Consolidated Financial Statements for more information. Critical Accounting Estimates Significant accounting policies are described in the notes to the consolidated financial statements.
As discussed further in Note 3 to the Consolidated Financial Statements, during the year ended June 30, 2022, the Company recognized $5.3 million in long-lived asset impairment charges related to its NauticStar reporting unit.
As discussed further in Note 6 to the Consolidated Financial Statements, during the year ended June 30, 2024, the Company recognized $6.9 million in long-lived asset impairment charges related to its Aviara reporting unit. 31 As discussed further in Note 3 to the Consolidated Financial Statements, during the year ended June 30, 2022, the Company recognized $5.3 million in long-lived asset impairment charges related to its NauticStar reporting unit.
Interest on variable rate debt instruments was calculated using interest rates in effect for our borrowings as of June 30, 2023 and holding them constant for the life of the instrument. Purchase Commitments — As of June 30, 2023, the Company is committed to purchasing $28.5 million of engines, of which $19.5 million is committed during the next 12 months.
Interest on variable rate debt instruments was calculated using interest rates in effect for our borrowings as of June 30, 2024 and holding them constant for the life of the instrument. Purchase Commitments — As of June 30, 2024, the Company is committed to purchasing $16.5 million of engines.
For the periods presented herein, these adjustments include other intangible asset amortization, share-based compensation, business development consulting costs, goodwill impairment, Aviara transition costs, and debt refinancing charges.
For the periods presented herein, these adjustments include non-cash impairment charges, other intangible asset amortization, share-based compensation, CEO transition costs, and business development consulting costs.
Interest on Long-Term Debt Obligations — As of June 30, 2023, the Company has estimated total interest payments on its outstanding long-term debt obligations of $8.9 million, of which $4.0 million is due during the next 12 months.
Interest on Long-Term Debt Obligations — As of June 30, 2024, the Company has estimated total interest payments on its outstanding long-term debt obligations of $6.1 million, of which $3.2 million is due during the next 12 months.
Asset Impairment Goodwill The Company reviews goodwill for impairment at its annual impairment testing date, which is June 30, and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value.
For additional information regarding these policies, see Note 1 – Significant Accounting Policies in Notes to Consolidated Financial Statements. Asset Impairment Goodwill The Company reviews goodwill for impairment at its annual impairment testing date, which is June 30, and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value.
The increase was primarily driven by higher selling prices, partially offset by decreased sales volumes, less favorable model mix, and increased dealer incentives. Operating income decreased 3.8 percent during fiscal 2023, when compared to the same prior year period.
The decrease was primarily driven by lower unit volume and increased dealer incentives, partially offset by higher prices and favorable model mix and options. Operating income decreased 70.8 percent during fiscal 2024, when compared to the same prior year period.
Our effective tax rates differ from the statutory rates, primarily due to a change in state taxes as a result of selling NauticStar, as further described in Note 10 in Notes to Consolidated Financial Statements. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.
For fiscal 2023, our effective tax rate differs from the statutory rate, primarily due to a change in state taxes as a result of sell NauticStar. See the components of our effective tax rate reconciliation in Note 10. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.
The following table and discussion below relate to our cash flows from continuing operations for operating, investing, and financing activities: 2023 2022 2021 Total cash provided by (used in): Operating activities $ 136,824 $ 82,378 $ 73,961 Investing activities (120,933 ) (12,296 ) (25,219 ) Financing activities (27,148 ) (62,540 ) (17,773 ) Net change in cash from continuing operations $ (11,257 ) $ 7,542 $ 30,969 Fiscal 2023 Cash Flow from Continuing Operations Net cash provided by operating activities was $136.8 million, primarily due to net income, as well as reductions of working capital.
The following table and discussion below relate to our cash flows from continuing operations for operating, investing, and financing activities: (Dollar amounts in thousands) 2024 2023 2022 Total cash provided by (used in): Operating activities $ 12,569 $ 136,824 $ 82,378 Investing activities (1,785 ) (120,933 ) (12,296 ) Financing activities (23,135 ) (27,148 ) (62,540 ) Net change in cash and cash equivalents from continuing operations $ (12,351 ) $ (11,257 ) $ 7,542 Fiscal 2024 Cash Flow from Continuing Operations Net cash provided by operating activities was $12.6 million, primarily due to net income, partially offset by working capital usage.
Net cash used in financing activities was $27.1 million, which included net payments of $3.0 million on long-term debt and $22.9 million of stock repurchases. Fiscal 2022 Cash Flow from Continuing Operations Net cash provided by operating activities was $82.4 million, mainly due to net income, partially offset by working capital usage.
Net cash used in financing activities was $23.1 million, which included net payments of $4.5 million on long-term debt and $16.3 million of stock repurchases. Fiscal 2023 Cash Flow from Continuing Operations Net cash provided by operating activities was $136.8 million, primarily due to net income, as well as reductions of working capital as defined above.
Crest Segment The following table sets forth Crest segment results for the fiscal years ended: (Dollar amounts in thousands) 2023 2022 Change % Change Net sales $ 141,247 $ 140,859 $ 388 0.3 % Operating income 20,106 19,892 214 1.1 % Purchases of property, plant and equipment 7,149 4,193 2,956 70.5 % Unit sales volume 2,836 3,156 (320 ) (10.1 %) Net sales per unit $ 50 $ 45 $ 5 11.1 % Net sales increased 0.3 percent during fiscal 2023, when compared to fiscal 2022, as a result of higher prices, and favorable model mix and options, partially offset by decreased unit volume and increased dealer incentives.
Pontoon Segment The following table sets forth Pontoon segment results for the fiscal years ended: (Dollar amounts in thousands) 2024 2023 Change % Change Net sales $ 59,615 $ 141,247 $ (81,632 ) (57.8 %) Operating income (loss) (2,097 ) 20,106 (22,203 ) (110.4 %) Purchases of property, plant and equipment 2,613 7,149 (4,536 ) (63.4 %) Unit sales volume 1,241 2,836 (1,595 ) (56.2 %) Net sales per unit $ 48 $ 50 $ (2 ) (4.0 %) Net sales decreased 57.8 percent during fiscal 2024, when compared to fiscal 2023, as a result of decreased unit volume, increased dealer incentives, and unfavorable model mix and options, partially offset by higher prices.
Net Sales increased 3.2 percent for fiscal 2023 when compared to fiscal 2022. The increase was a result of higher prices, partially offset by decreased sales volumes, increased dealer incentives, and less favorable model mix.
Net Sales decreased 44.6 percent for fiscal 2024 when compared to fiscal 2023. The decrease was a result of lower unit volume, an increase in dealer incentives, and unfavorable model mix and options, partially offset by higher prices.
The overall decrease was driven by higher costs from inflationary pressures, higher dealer incentives, less favorable model mix, decreased sales volumes, and increased warranty costs related to prior model year expenses, partially offset by favorable pricing. Purchases of property, plant, and equipment increased $10.8 million during fiscal 2023, when compared to fiscal 2022.
The overall decrease was driven by decreased sales volume, higher dealer incentives, and CEO transition costs, partially offset by higher prices, favorable model mix and options, decreased compensation related expenses, and decreased sales and marketing expenses. Purchases of property, plant, and equipment decreased $9.5 million during fiscal 2024, when compared to fiscal 2023.
The evaluation and execution of the internal growth and other strategic initiatives is a bespoke initiative, and the costs associated therewith do not constitute normal recurring cash operating expenses necessary to operate the Company's business. (b) Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.
The evaluation and execution of the internal growth and other strategic initiatives is a bespoke initiative, and the costs associated therewith do not constitute normal recurring cash operating expenses necessary to operate the Company’s business. (e) Reflects income tax expense at a tax rate of 20.0% for 2024 and 23.0% for 2023 and 2022.
Our capital spending was focused on expanding our capacity, maintenance capital, and investments in information technology. Net cash used in financing activities was $62.5 million, which included net payments of $36.7 million on long-term debt and $25.5 million of stock repurchases. Off-Balance Sheet Arrangements The Company did not have any off-balance sheet financing arrangements as of June 30, 2023.
Net cash used in financing activities was $27.1 million, which included net payments of $3.0 million on long-term debt and $22.9 million of stock repurchases. 29 Off-Balance Sheet Arrangements The Company did not have any off-balance sheet financing arrangements as of June 30, 2024.
On June 24, 2021, the board of directors of the Company authorized a stock repurchase program that allows for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024.
Refer to Note 9 — Long Term Debt in the Notes to Consolidated Financial Statements for further details. On June 24, 2021, the Board authorized a share repurchase program that allowed for the repurchase of up to $50.0 million of our common stock during the three-year period ended June 24, 2024.
Application of Critical Accounting Policies and Estimates Significant accounting policies are described in the notes to the consolidated financial statements. In the application of these policies, certain estimates are made that may have a material impact on our financial condition and results of operations.
In the application of these policies, certain estimates are made that may have a material impact on our financial condition and results of operations. Actual results could differ from those estimates and cause our reported net income to vary significantly from period to period.
Dealer incentives include higher floor plan financing costs as a result of increased dealer inventories and interest rates, and other incentives as the retail environment becomes more competitive. Gross Margin. Gross Margin percentage declined 60 basis points during fiscal 2023 when compared to fiscal 2022.
Dealer incentives 24 include higher floor plan financing costs from higher dealer inventories entering the year and higher interest rates, as well as rebate programs and other measures taken by the Company to assist dealers as the retail environment remains competitive. Gross Margin. Gross Margin percentage declined 730 basis points during fiscal 2024 when compared to fiscal 2023.
The increase was primarily due to capital spending focused on capacity expansion. 23 Aviara Segment The following table sets forth Aviara segment results for the fiscal years ended: (Dollar amounts in thousands) 2023 2022 Change % Change Net sales $ 52,143 $ 34,723 $ 17,420 50.2 % Operating loss (4,515 ) (9,038 ) 4,523 50.0 % Goodwill impairment — 1,100 (1,100 ) — Purchases of property, plant and equipment 5,760 1,461 4,299 294.3 % Unit sales volume 134 100 34 34.0 % Net sales per unit $ 389 $ 347 $ 42 12.1 % Net sales increased 50.2 percent during fiscal 2023, when compared to fiscal 2022, mainly due to increased sales volume and higher selling prices, partially offset by higher dealer incentives.
For fiscal 2024, capital spending was focused on facility enhancements and tooling. 25 Aviara Segment The following table sets forth Aviara segment results for the fiscal years ended: (Dollar amounts in thousands) 2024 2023 Change % Change Net sales $ 44,237 $ 52,143 $ (7,906 ) (15.2 %) Operating loss (19,844 ) (4,515 ) (15,329 ) 339.5 % Impairments 9,827 — 9,827 — Purchases of property, plant and equipment 5,836 5,760 76 1.3 % Unit sales volume 134 134 — — Net sales per unit $ 330 $ 389 $ (59 ) (15.2 %) Net sales decreased 15.2 percent during fiscal 2024, when compared to fiscal 2023, mainly due to unfavorable model mix and options and higher dealer incentives, partially offset by higher prices.
In addition, because not all companies use identical calculations, our presentation of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies, including companies in our industry. Due to the effects of discontinued operations, as discussed above in “Part I, Item 1.
In addition, because not all companies use identical calculations, our presentation of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies, including companies in our industry. The following table presents a reconciliation of net income from continuing operations as determined in accordance with U.S.
Segment Results MasterCraft Segment The following table sets forth MasterCraft segment results for the fiscal years ended: (Dollar amounts in thousands) 2023 2022 Change % Change Net sales $ 468,656 $ 466,027 $ 2,629 0.6 % Operating income 101,324 105,341 (4,017 ) (3.8 %) Purchases of property, plant and equipment 17,414 6,642 10,772 162.2 % Unit sales volume 3,407 3,596 (189 ) (5.3 %) Net sales per unit $ 138 $ 130 $ 8 6.2 % Net sales increased 0.6 percent during fiscal 2023, when compared to fiscal 2022.
Segment Results MasterCraft Segment The following table sets forth MasterCraft segment results for the fiscal years ended: (Dollar amounts in thousands) 2024 2023 Change % Change Net sales $ 262,736 $ 468,656 $ (205,920 ) (43.9 %) Operating income 29,573 101,324 (71,751 ) (70.8 %) Purchases of property, plant and equipment 7,912 17,414 (9,502 ) (54.6 %) Unit sales volume 1,755 3,407 (1,652 ) (48.5 %) Net sales per unit $ 150 $ 138 $ 12 8.7 % Net sales decreased 43.9 percent during fiscal 2024, when compared to fiscal 2023.
GAAP to EBITDA and Adjusted EBITDA, and net income from continuing operations margin (expressed as a percentage of net sales) to Adjusted EBITDA margin (expressed as a percentage of net sales) for the periods indicated: % of Net % of Net % of Net 2023 sales 2022 sales 2021 sales Net income from continuing operations $ 90,452 13.7% $ 87,945 13.7% $ 58,438 12.5% Income tax expense 27,135 26,779 16,080 Interest expense 2,679 1,471 3,392 Interest income (3,351 ) — — Depreciation and amortization 10,569 9,731 8,368 EBITDA 127,484 19.3% 125,926 19.6% 86,278 18.5% Share-based compensation 3,656 3,510 2,932 Business development consulting costs (a) 312 — — Goodwill impairment (b) — 1,100 — Aviara transition costs (c) — — 2,150 Debt refinancing charges (d) — — 769 Adjusted EBITDA $ 131,452 19.9% $ 130,536 20.3% $ 92,129 19.8% (a) Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of internal growth and other strategic initiatives.
GAAP to EBITDA and Adjusted EBITDA, and net income from continuing operations margin (expressed as a percentage of net sales) to Adjusted EBITDA margin (expressed as a percentage of net sales) for the periods indicated: % of Net % of Net % of Net (Dollar amounts in thousands) 2024 sales 2023 sales 2022 sales Net income from continuing operations $ 8,722 2.4% $ 90,452 13.7% $ 87,945 13.7% Income tax expense 1,407 27,135 26,779 Interest expense 3,292 2,679 1,471 Interest income (5,789 ) (3,351 ) — Depreciation and amortization 11,182 10,569 9,731 EBITDA 18,814 5.1% 127,484 19.3% 125,926 19.6% Impairments (a) 9,827 — 1,100 Share-based compensation (b ) 2,598 3,656 3,510 CEO transition costs (c) 1,708 — — Business development consulting costs (d) — 312 — Adjusted EBITDA $ 32,947 9.0% $ 131,452 19.9% $ 130,536 20.3% The following table sets forth a reconciliation of net income from continuing operations as determined in accordance with U.S.
The increase was due to capital spending focused on facility enhancements, strategic initiatives, and information technology.
For fiscal 2024, capital spending was focused on facility enhancements, tooling, and information technology.
Held-to-maturity securities totaled $91.6 million as of June 30, 2023. As of June 30, 2022, there were no outstanding held-to-maturity securities. As of June 30, 2023, we had no amounts outstanding under the Revolving Credit Facility, leaving $100.0 million of available borrowing capacity.
As of June 30, 2024, we had no amounts outstanding under the Revolving Credit Facility, leaving $100.0 million of available borrowing capacity. Total debt outstanding under the Term Loan as of June 30, 2024 and June 30, 2023 was $49.3 million and $53.7 million, respectively.
The costs of amortizable intangible assets, including dealer networks, are recognized over their expected useful lives, approximately ten years for the dealer networks, using the straight-line method. Intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate long-lived assets as described below.
The costs of amortizable intangible assets, including dealer networks, are recognized over their expected useful lives, approximately ten years for the dealer networks, using the straight-line method. The dealer network intangible asset within our MasterCraft reporting unit is fully amortized.
Our principal sources of liquidity are our cash balance, held-to-maturity securities, cash generated from operating activities, our revolving credit agreement and the refinancing and/or new issuance of long-term debt. Cash and cash equivalents totaled $19.8 million as of June 30, 2023, a decrease of $14.4 million from $34.2 million as of June 30, 2022.
Liquidity and Capital Resources Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, service our debt, fund potential acquisitions, and fund our share repurchase program. Our principal sources of liquidity are our cash balance, held-to-maturity securities, cash generated from operating activities, our revolving credit agreement and the refinancing and/or new issuance of long-term debt.
Lower margins were the result of higher costs related to material and overhead inflation, higher costs from dealer incentives, lower absorption due to decreased sales volumes, less favorable model mix, and increased warranty costs related to prior model year expenses, partially offset by higher prices and improved production efficiencies. Operating Expenses .
Lower margins were the result of lower cost absorption due to planned decreased unit volume and higher dealer incentives, partially offset by higher prices. Operating Expenses .
On July 24, 2023, the board of directors of the Company authorized a new share repurchase program under which the Company may repurchase up to $50 million of its outstanding shares of common stock. The new authorization will become effective upon the expiration of the Company's existing $50 million share repurchase authorization.
As of June 30, 2023, $1.6 million remained available under this program, all of which was fully utilized during the fiscal 2024 first quarter ended October 1, 2023. 28 On July 24, 2023, the Board authorized a new share repurchase program under which the Company may repurchase up to $50.0 million of its outstanding shares of common stock.
Consolidated Results 2023 2022 Change % Change (Dollar amounts in thousands) Consolidated statements of operations : NET SALES $ 662,046 $ 641,609 $ 20,437 3.2 % COST OF SALES 492,333 473,419 18,914 4.0 % GROSS PROFIT 169,713 168,190 1,523 0.9 % OPERATING EXPENSES: Selling and marketing 13,808 12,869 939 7.3 % General and administrative 37,034 36,070 964 2.7 % Amortization of other intangible assets 1,956 1,956 — 0.0 % Goodwill impairment — 1,100 (1,100 ) — Total operating expenses 52,798 51,995 803 1.5 % OPERATING INCOME 116,915 116,195 720 0.6 % OTHER INCOME (EXPENSE): Interest expense (2,679 ) (1,471 ) (1,208 ) 82.1 % Interest income 3,351 — 3,351 — INCOME BEFORE INCOME TAX EXPENSE 117,587 114,724 2,863 2.5 % INCOME TAX EXPENSE 27,135 26,779 356 1.3 % NET INCOME FROM CONTINUING OPERATIONS $ 90,452 $ 87,945 $ 2,507 2.9 % Additional financial and other data: Unit sales volume: MasterCraft 3,407 3,596 (189 ) (5.3 %) Crest 2,836 3,156 (320 ) (10.1 %) Aviara 134 100 34 34.0 % Consolidated unit sales volume 6,377 6,852 (475 ) (6.9 %) Net sales: MasterCraft $ 468,656 $ 466,027 $ 2,629 0.6 % Crest 141,247 140,859 388 0.3 % Aviara 52,143 34,723 17,420 50.2 % Consolidated net sales $ 662,046 $ 641,609 $ 20,437 3.2 % Net sales per unit: MasterCraft $ 138 $ 130 $ 8 6.2 % Crest 50 45 5 11.1 % Aviara 389 347 42 12.1 % Consolidated net sales per unit 104 94 10 10.6 % Gross margin 25.6 % 26.2 % (60) bps Net Sales.
Consolidated Results 2024 2023 Change % Change (Dollar amounts in thousands) Consolidated statements of operations : NET SALES $ 366,588 $ 662,046 $ (295,458 ) (44.6 %) COST OF SALES 299,491 492,333 (192,842 ) (39.2 %) GROSS PROFIT 67,097 169,713 (102,616 ) (60.5 %) OPERATING EXPENSES: Selling and marketing 13,430 13,808 (378 ) (2.7 %) General and administrative 34,396 37,034 (2,638 ) (7.1 %) Amortization of other intangible assets 1,812 1,956 (144 ) (7.4 %) Impairments 9,827 — 9,827 — Total operating expenses 59,465 52,798 6,667 12.6 % OPERATING INCOME 7,632 116,915 (109,283 ) (93.5 %) OTHER INCOME (EXPENSE): Interest expense (3,292 ) (2,679 ) (613 ) 22.9 % Interest income 5,789 3,351 2,438 72.8 % INCOME BEFORE INCOME TAX EXPENSE 10,129 117,587 (107,458 ) (91.4 %) INCOME TAX EXPENSE 1,407 27,135 (25,728 ) (94.8 %) NET INCOME FROM CONTINUING OPERATIONS $ 8,722 $ 90,452 $ (81,730 ) (90.4 %) Additional financial and other data: Unit sales volume: MasterCraft 1,755 3,407 (1,652 ) (48.5 %) Pontoon 1,241 2,836 (1,595 ) (56.2 %) Aviara 134 134 — — Consolidated unit sales volume 3,130 6,377 (3,247 ) (50.9 %) Net sales: MasterCraft $ 262,736 $ 468,656 $ (205,920 ) (43.9 %) Pontoon 59,615 141,247 (81,632 ) (57.8 %) Aviara 44,237 52,143 (7,906 ) (15.2 %) Consolidated net sales $ 366,588 $ 662,046 $ (295,458 ) (44.6 %) Net sales per unit: MasterCraft $ 150 $ 138 $ 12 8.7 % Pontoon 48 50 (2 ) (4.0 %) Aviara 330 389 (59 ) (15.2 %) Consolidated net sales per unit 117 104 13 12.5 % Gross margin 18.3 % 25.6 % (730) bps Net Sales.
Interest income of $3.4 million during fiscal 2023 is derived from investments in fiscal 2023 in a portfolio of fixed income securities as part of the Company's cash management strategy. Income Tax Expense. Our consolidated effective income tax rate decreased to 23.1 percent for fiscal 2023 from 23.3 percent for fiscal 2022.
Interest income increased $2.4 million during fiscal 2024 primarily due to fiscal 2024 benefiting from a full year of investment income, compared to a partial year in fiscal 2023. Income Tax Expense. Our consolidated effective income tax rate decreased to 13.9 percent for fiscal 2024 from 23.1 percent for fiscal 2023.
We believe our cash balance, investments, cash from operations, and our ability to borrow, will be sufficient to provide for our liquidity and capital resource needs.
During fiscal 2024 and fiscal 2023, the Company repurchased 750,943 shares and 872,055 shares of common stock for $16.3 million and $22.9 million, respectively, in cash, including related fees and expenses. We believe our cash balance, investments, cash from operations, and our ability to borrow, will be sufficient to provide for our liquidity and capital resource needs.
See Note 12 in Notes to Consolidated Financial Statements for more information on repurchase obligations. 30 New Accounting Pronouncements See “Part II, Item 8. Financial Statements and Supplementary Data — Note 1 — Significant Accounting Policies — New Accounting Pronouncements.”
Financial Statements and Supplementary Data — Note 1 — Significant Accounting Policies — New Accounting Pronouncements.”
Purchases of property, plant, and equipment increased $4.3 million during fiscal 2023, when compared to fiscal 2022. The increase was due to capital spending focused on capacity expansion and tooling. Non-GAAP Measures EBITDA, Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin We define EBITDA as net income from continuing operations, before interest, income taxes, depreciation and amortization.
See Notes 5 and 6 for further information related to the impairment charges. Non-GAAP Measures EBITDA, Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin We define EBITDA as net income from continuing operations, before interest, income taxes, depreciation and amortization.
Selling, general and administrative expenses as a percentage of net sales were relatively flat during fiscal 2023 when compared to the same prior year period. Interest Expense. Interest expense increased $1.2 million primarily due to higher effective interest rates. Interest Income.
Operating expenses increased 12.6 percent during fiscal 2024 when compared to the same prior year period due to non-cash impairment charges of $9.8 million recorded in our Aviara segment and CEO transition costs, partially offset by decreased compensation related expenses. Interest Expense. Interest expense increased $0.6 million primarily due to higher effective interest rates. Interest Income.
Working capital usage primarily consisted of an increase in inventory, accounts receivable and prepaid and other current assets, partially offset an increase in accrued expenses and other current liabilities and accounts payable. Inventory increased due to an increase in raw materials to support higher production volumes and to increase safety stock to manage supply chain risk.
Working capital usage primarily consisted of a decrease in accrued expenses and other current liabilities, accounts payable, and income tax payable, offset by a decrease in inventories.
Removed
For a reconciliation of net income from continuing operations to Adjusted Net Income, see “Non-GAAP Measures” below. Discontinued Operations On September 2, 2022, the Company completed the sale of its NauticStar business. This business, which was previously reported as the Company's NauticStar segment until fiscal 2023, is being reported as discontinued operations for all periods presented.
Added
For a reconciliation of net income from continuing operations to Adjusted Net Income, see “Non-GAAP Measures” below. Fiscal 2024 Overview As anticipated, general market volatility and economic headwinds created uncertainty and softness in the retail environment for fiscal 2024.
Removed
The Company's results for all periods presented, as discussed in Management's Discussion and Analysis, are presented on a continuing operations basis with prior year amounts recast to provide comparability. See Note 3 in Notes to Consolidated Financial Statements for more information on Discontinued Operations. Fiscal 2023 Overview Net sales were up slightly during fiscal 2023 when compared to fiscal 2022.
Added
As previously disclosed, because of the anticipated softness in retail demand, the Company approached its wholesale production plan for fiscal 2024 with a prudent level of caution and a focus on rebalancing dealer inventories consistent with the expected retail demand.
Removed
The increase was primarily due to higher pricing to offset inflationary cost pressures, partially offset by a decrease in wholesale volume, dealer incentives and less favorable model mix. We achieved our goal of rebalancing dealer inventories; however, due to a slowing retail environment, the number of wholesale units sold were lower when compared to prior year.
Added
As a result, we experienced lower cost absorption and decreased sales volume, leading to lower net sales and gross margin compared to the prior fiscal year. On March 4, 2024, Frederick Brightbill, Chief Executive Officer (“CEO”) and Chairman of the Board announced his retirement as CEO of the Company, effective March 18, 2024, and as Chairman effective June 30, 2024.
Removed
Model mix trended towards smaller-sized models as more boats were sold as inventory stock versus retail-sold boats. Also, because of increased dealer inventories, higher interest rates, and an increasingly competitive retail environment, dealer incentives, which include floor plan financing costs and other incentives, have increased. Gross margin declined during fiscal 2023 when compared to fiscal 2022.
Added
In connection with Mr. Brightbill’s retirement, the Company appointed Brad Nelson as CEO, effective March 18, 2024. Mr. Nelson also joined the Board at that time. Roch Lambert, the Company’s former Lead Independent Director, assumed the role of Chairman of the Board, effective July 1, 2024. Mr. Brightbill will serve as a consultant to the Company through June 30, 2025.
Removed
Offsetting the increased net sales discussed above were increased expenses related to material, labor and overhead inflation. Other contributory expenses included increased insurance premiums and warranty-related costs. Overall, including the impact of dealer incentives in net sales noted above, the gross margin percentage declined 60 basis points. 21 Operating expenses slightly increased during fiscal 2023 when compared to fiscal 2022.
Added
During fiscal 2024, we recognized $1.7 million of CEO transition costs in General and administrative expense within the consolidated statements of operations. CEO transition costs include amounts paid to the former CEO under the terms of his retirement agreements and related legal fees.
Removed
Total selling, general and administrative expenses as a percentage of net sales remained relatively flat during fiscal 2023 when compared to the same prior year period.
Added
Also included are recruiting and relocation costs related to the new CEO. 23 Aviara Impairment Activity During the fourth quarter of fiscal 2024, the Company identified an indication of impairment related to its Aviara segment’s property, plant, equipment and inventory.
Removed
Operating expenses increased 1.5 percent during fiscal 2023 when compared to the same prior year period. During fiscal 2022, a $1.1 million goodwill impairment charge was recorded in the Aviara segment, as discussed in Note 7 in the Notes to 22 Consolidated Financial Statements.
Added
After performing a recoverability test, the Company recognized an impairment charge of $9.8 million, which adjusted the related assets to their estimated fair value. See Notes 5 and 6 for further information related to the impairment analysis.
Removed
Operating income increased 1.1 percent during fiscal 2023, when compared to the same prior year period. The increase was primarily due to higher selling prices, and favorable model mix and options, partially offset by higher costs from inflationary pressures, decreased unit volume, and increased dealer incentives.
Added
Subsequent to year-end, the Company announced that it had entered into an asset exchange agreement under which it will transfer rights to its Aviara brand of luxury dayboats and certain related assets to a third party. The Aviara Transaction is subject to customary closing conditions and is expected to close in the first quarter of fiscal 2025.
Removed
Purchases of property, plant, and equipment increased $3.0 million during fiscal 2023, when compared to the same prior-year period.
Added
Following consummation of the Aviara Transaction, we intend to close the Merritt Island facility and offer the property for open market sale. The Company intends to classify Aviara as discontinued operations beginning in the first quarter of fiscal 2025.
Removed
Operating loss decreased 50.0 percent for fiscal 2023, when compared to fiscal 2022. The change was primarily a result of higher prices, improved production efficiencies, and increased sales volume, partially offset by higher costs from inflationary pressures, and increased dealer incentives. Additionally, a goodwill impairment charge was recorded during the first quarter of fiscal 2022.
Added
Operating loss was $2.1 million during fiscal 2024, compared to operating income of $20.1 million in fiscal 2023. The change was primarily due to decreased net sales, as discussed above, and lower cost absorption. Purchases of property, plant, and equipment decreased $4.5 million during fiscal 2024, when compared to fiscal 2023.
Removed
Business,” the Company's non-GAAP financial measures are presented on a continuing operations basis, for all periods presented. The following table presents a reconciliation of net income from continuing operations as determined in accordance with U.S.
Added
Operating losses increased 339.5 percent for fiscal 2024, when compared to fiscal 2023.
Removed
(c) Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida. Costs include duplicative overhead costs and costs not indicative of ongoing operations (such as training and facility preparation). (d) Represents loss recognized upon refinancing the Company’s debt in fiscal 2021.
Added
The change was a result of non-cash impairment charges of $9.8 million primarily related to property, plant, equipment and inventory, as well as inefficiencies related to the ramp up of new product launches, higher dealer incentives, and unfavorable model mix and options, partially offset by higher prices and reduced warranty costs.
Removed
The loss is comprised of unamortized debt issuance costs related to the previously existing credit facility and third-party legal costs associated with the refinancing. 25 The following table sets forth a reconciliation of net income from continuing operations as determined in accordance with U.S.
Added
See Notes 5, 6, and 7 within the Notes to the Consolidated Financial Statements for more information on impairment charges. (b) Included in share-based compensation are the impacts of accelerating expense recognition for equity awards related to the CEO transition.
Removed
The evaluation and execution of the internal growth and other strategic initiatives is a bespoke initiative, and the costs associated therewith do not constitute normal recurring cash operating expenses necessary to operate the Company's business. (b) Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.
Added
(c) Represents amounts paid to the Company’s former CEO upon his departure under the terms of his transition agreements and legal fees incurred with the transition, but excluding amounts related to accelerating expense recognition for equity awards related to the CEO transition noted in (b). Also included are recruiting and relocation costs related to the new CEO.
Removed
(c) Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida. Costs include duplicative overhead costs and costs not indicative of ongoing operations (such as training and facility preparation). (d) Represents loss recognized upon refinancing the Company’s debt in fiscal 2021.
Added
(d) Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of internal growth and other strategic initiatives.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed4 unchanged
Biggest changeSubstantial increases in the prices of raw materials, parts, and components would increase our operating costs, and could reduce our profitability if we are unable to recoup the increased costs through higher product prices or improved operating efficiencies. As of June 30, 2023, we had $54.0 million of long-term debt outstanding, bearing interest at the effective interest rate of 6.50%.
Biggest changeSubstantial increases in the prices of raw materials, parts, and components would increase our operating costs, and could reduce our profitability if we are unable to recoup the increased costs through higher product prices or improved operating efficiencies. As of June 30, 2024, we had $49.5 million of long-term debt outstanding, bearing interest at the effective interest rate of 6.69%.
See Note 9 in Notes to Consolidated Financial Statements for more information regarding our long-term debt. A hypothetical 1% increase or decrease in interest rates would have resulted in a $0.6 million change to our interest expense for fiscal 2023. ITEM 8. FINANCIAL STATEMENT S AND SUPPLEMENTARY DATA.
See Note 9 in Notes to Consolidated Financial Statements for more information regarding our long-term debt. A hypothetical 1% increase or decrease in interest rates would have resulted in a $0.5 million change to our interest expense for fiscal 2024. ITEM 8. FINANCIAL STATEMENT S AND SUPPLEMENTARY DATA.

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